UC Davis Medical Center recorded net income of $33 million for the fiscal year, about $10 million less than the net income from the prior year, due primarily to a decrease in reimbursement from the Medicare program and anticipated increases in labor, pharmaceutical and medical supply costs.

The decrease was expected, said William McGowan, chief financial officer for the Health System. Despite the drop, McGowan noted the investment of more than $70 million in new equipment and continued development of the electronic medical record.

The medical center had total patient revenues of $783.3 million and other operating revenues of $14.7 million in fiscal year 2003-04. It had total operating expenses of $752.6 million and non-operating expenses of $12.3 million.

The health system's total net patient revenue in 2003-04 increased by $15.4 million, or 2 percent, over 2002-03.

Total operating expenses of $752.6 million in 2003-04 represented an increase of $25.8 million, or 3.5 percent, over the previous year, due mainly to rising labor costs and increased pharmaceutical and supply costs. The total paid for salaries and employee benefits in 2003-04 increased by $25.9 million, or 6.8 percent, over 2002-03. Meanwhile, workers' compensation expenses increased by $2.5 million, or 16.8 percent, due to increases in premiums and employee staffing. However, this is an improvement from prior years, when costs were increasing by as much as 98 percent.

Expenses for medical supplies increased by $9.9 million, or 10.3 percent. The cost of prosthetics and implants increased by $3.3 million, while pharmaceutical costs increased by $4 million.

There were 32,235 hospital admissions in 2003-04, an increase of 895, or 2.9 percent, over 2002-03. The average length of stay decreased from 4.9 to 4.7 days, due to increased efficiencies. Total outpatient visits increased by 2,386.

McGowan said the administration is currently monitoring discussions between the state and the Center for Medicare and Medicaid Services that could lead to cuts in the Medi-Cal program.

"Another one of our priorities is continuing to offer competitive wages and benefits for our staff," McGowan said.